By analyzing existing cross correlation between Shopify and Sydbank AS you can compare the effects of market volatilities on Shopify and Sydbank AS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shopify with a short position of Sydbank AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and Sydbank AS.

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Can any of the company-specific risk be diversified away by investing in both Shopify and Sydbank AS at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing Shopify and Sydbank AS into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for Shopify and Sydbank AS

-0.09

Correlation

Good diversification

The 3 months correlation between Shopify and Sydbank is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shopify Inc and Sydbank AS in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Sydbank AS and Shopify is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shopify are associated (or correlated) with Sydbank AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank AS has no effect on the direction of Shopify i.e. Shopify and Sydbank AS go up and down completely randomly.

Pair Corralation between Shopify and Sydbank AS

Given the investment horizon of 30 days, Shopify is expected to generate 1.44 times more return on investment than Sydbank AS. However, Shopify is 1.44 times more volatile than Sydbank AS. It trades about 0.18 of its potential returns per unit of risk. Sydbank AS is currently generating about 0.14 per unit of risk. If you would invest 41,832 in Shopify on May 7, 2020 and sell it today you would earn a total of 30,945 from holding Shopify or generate 73.97% return on investment over 30 days.

Shopify Inc vs. Sydbank AS

Shopify Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 12 (%) of all global equities and portfolios over the last 30 days. Inspite very abnormal forward-looking indicators, Shopify displayed solid returns over the last few months and may actually be approaching a breakup point.

Sydbank AS Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Sydbank AS are ranked lower than 9 (%) of all global equities and portfolios over the last 30 days. Allthough quite conflicting forward indicators, Sydbank AS disclosed solid returns over the last few months and may actually be approaching a breakup point.

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